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Spring 2015
FROM THE PRESIDENT’S DESK
Training For Tomorrow: The TRID
Spring Training – No, I’m not talking about your favorite sports team or
athlete. I’m talking about getting in shape for the August 1st effective date of
the TILA-RESPA Integrated Disclosure (TRID) Rule. The CFPB has combined
the HUD-1 and final Truth-In-Lending (TIL) statement to create a Closing
Disclosure (CD), and the Good Faith Estimate and early TIL disclosures are
replaced with a Loan Estimate (LE).
IN THIS ISSUE
From the President’s Desk
TILA-RESPA Integrated
Disclosure Rule
Glossary of Terms
PA G E
1
2-3
Basics of the TILA-RESPA
Integrated Disclosure Rule
4
CFPB TILA-RESPA
Integrated Disclosure Rule
The Questions Attorneys
and Agents Need Answers
to, Some Answers, and
Why We Don’t Have All
the Answers ... Yet
5-6
Corporation of Love
7-8
• Review the CFPB’s latest TRID updates at
www.consumerfinance.gov/regulatory-implementation/tila-respa/
Lenders Embrace
ALTA Best Practices
8
• Schedule training dates and begin training your employees on your
business’ policies and procedures: Protecting NPI, securing and
safeguarding escrow funds, managing consumer complaints.
Holiday and
Office Closures
8
Announcement
8
Let’s talk about what we can do to train for tomorrow. This newsletter is
dedicated to giving you information about the new forms (without the burden
of all the details) to keep you and your staff informed and ready for the
significant changes in settlement procedures that go into effect August 1, 2015.
Training For Tomorrow
• Learn the lingo in the attached Glossary of Terms
• Start a trial run on the TRID. Go to www.consumerfinance.gov/
regulatory-implementation/tila-respa/#disclosures for review of
sample Closing Disclosure forms.
Watch your inbox for our Spring Training email every Wednesday beginning
March 25th.
- Josie Lubiejewski
First American Title Insurance Company, Penn Attorneys and Ohio Bar Title Insurance Company make no express or implied
warranty respecting the information presented and assumes no responsibility for errors or omissions. First American, the eagle logo
and First American Title, are registered trademarks or trademarks of First American Financial Corporation and/or its affiliates.
AMD: 04/2015
©2015 First American Financial Corporation and/or its affiliates. All rights reserved.  NYSE: FAF
TILA-RESPA Integrated Disclosure Rule
GLOSSARY OF TERMS
2-Step Mortgages: An adjustable rate mortgage that has the
same interest rate for part of the mortgage and a different rate
for the rest of the mortgage is called a 2-step mortgage. The
interest rate changes or adjusts in accordance to the rates of the
current market. The borrower, on the other hand, might have the
option of making the choice between a variable interest rate or
a fixed interest rate at the adjustment date.
www.mortgagecalculator.org/helpful-advice/types-of-mortgages.php
CD: Closing Disclosure form designed to provide disclosures
that will be helpful to consumers in understanding all of the costs
of the transaction. This form will be given to the consumer three
(3) business days before closing and replaces the HUD-1 and
final Truth in Lending (TIL) disclosure on impacted transactions.
AIR: Adjustable Interest Rate
Closing Date: The date of consummation for the Closing
Disclosure.
Amount Financed: The loan amount available after payment of
the upfront charges.
AP: Adjustable Payment
APR: Annual Percentage Rate is the borrower’s costs of the loan
term expressed as a rate. This is not their interest rate.
Application (for purposes of the IMD requirements):
The submission of a consumer’s financial information for the
purposes of obtaining an extension of credit, and consists of the
submission of the consumer’s name; the consumer’s income; the
consumer’s social security number to obtain a credit report; the
property address; an estimate of the value of the property; and
the mortgage loan amount sought.
Business day: Defined differently for the Loan Estimate (LE)
vs. Closing Disclosure (CD): For the LE, a business day is a
day on which the creditor’s offices are open to the public for
carrying out substantially all of its business functions. For the
Closing Disclosure (CD) and revisions or corrections, a business
day means all calendar days except Sundays and legal public
holidays specified in 5 U.S.C. 6103(a) such as New Year’s Day,
the Birthday of Martin Luther King, Jr., Washington’s Birthday,
Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day, and Christmas Day.
Title Talk | Spring 2015
CFPB: Consumer Financial Protection Bureau (CFPB); an entity
created by the Dodd-Frank Act.
Closing Disclosure (CD): Replaces current HUD-1 on impacted
transactions and final TIL (Truth in Lending). This form is a
statement of final loan terms and closing costs.
Closing InsightTM: A suite of services designed to streamline
the complex, multi-party closing process and support lender
compliance. This Web-based solution delivers a number of
process improvements and quality controls to help lenders
aggregate fees, generate disclosure documents and reconcile
loan estimate data, while helping to ensure process consistency
every time. Closing Insight supports the closing process by
helping lenders gather loan fee information, collaborate with
settlement agents, deliver secure documents within mandated
timelines and validate pre-funding and post-closing data.
Consumer: Borrower/Buyer
Consummation: Occurs when the consumer becomes
contractually obligated to the creditor on the loan, not, for
example, when the consumer becomes contractually obligated
to a seller on a real estate transaction. The point in time when
a consumer becomes contractually obligated to the creditor on
the loan depends on applicable State law. Consummation is not
the same as closing or settlement.
Page 2
TILA-RESPA Integrated Disclosure Rule
GLOSSARY OF TERMS
Date Issued: The date the disclosures (Loan Estimate and
Closing Disclosure) are delivered to the consumer.
Disbursement Date: The date the amounts are to be disbursed
to a consumer and seller in a purchase transaction or the date
funds are to be paid to the consumer or a third party in a
transaction that is not a purchase transaction.
Finance Charge: The dollar amount the loan will cost the
consumer.
IMD: Integrated Mortgage Disclosure (New forms: Loan
Estimate (LE) and Closing Disclosure (CD)). The New Rule
and Forms apply to most closed-end consumer mortgage
loans. It does not apply to home equity lines of credit, reverse
mortgages, or mortgage loans secured by a mobile home or by
a dwelling that is not attached to real property. The new rule
does not apply to loans made by a creditor who makes five or
fewer mortgages in a year.
Issue Date on LE and CD: The date you deliver or place in the
mail the applicable disclosure.
Loan Estimate (LE): Form designed to provide disclosures that
will be helpful to consumers in understanding the key features,
costs and risks of the mortgage loan for which they are applying.
Initial disclosure to be given to the consumer three (3) business
days after application and replaces the GFE and early TIL.
New Rule: The TILA-RESPA Rule consolidates four existing
disclosures required under TILA and RESPA for closed-end
credit transactions secured by real property into two forms:
a Loan Estimate (LE) that must be delivered or placed in the
mail no later than the third business day after receiving the
consumer’s application, and a Closing Disclosure (CD) that must
be provided to the consumer at least three business days prior
to consummation.
Recording: The filing of documents with the appropriate
government agent affecting real property as a matter of public
record, giving notice to future purchasers, creditors, purchasers
or other interested parties.
RESPA: Real Estate Settlement Procedures Act
TIL: Truth in Lending
TILA: Truth in Lending Act
TIP: Total Interest Paid. The total amount of interest the
borrower will pay over the loan term as a percentage of the loan
amount.
Total Payments: Total amount paid after payment of all
principal, interest, mortgage insurance and loan costs as
scheduled.
TRID: TILA-RESPA Integrated Disclosures
MIC: Mortgage Insurance Case Number
MISMO®: Mortgage Industry Standards Maintenance
Organization. MISMO sets standards of how to format data
sent to another party for both residential and commercial
property transactions in US markets. By promoting improved
data consistency, MISMO aims to reduce costs and increase
transparency while promoting confidence in mortgages as an
asset class for investors. Ultimately, MISMO standards should
deliver cost savings to consumers.
UCD: Uniform Closing Dataset. Freddie Mac and Fannie
Mae, GSEs (Government Sponsored Entities) have provided a
common industry dataset called the Uniform Closing Dataset
(UCD) to support the Consumer Financial Protection Bureau’s
(CFPB) Closing Disclosures. Our Underwriter, First American
Title, recently published the UCD MISMO-mapping document.
Please note: it’s important that lenders and vendors develop
a plan for how they will implement the UCD. Using the UCD to
implement the CFPB’s Closing Disclosure could save you time
and resources.
MISMO Compliant: Software vendor developed their platform
using the MISMO data format standards to send data to other
parties.
Variance: Previously and also known as Tolerances
NMLSR ID: Nationwide Mortgage Licensing System and
Registry Identification Number
Written List of Providers: A written list of service providers
given to the consumer by the Creditor or Mortgage Broker for
a settlement service provider that the consumer is permitted to
shop for.
Title Talk | Spring 2015
Page 3
BASICS OF THE
TILA-RESPA INTEGR ATED
DISCLOSURE RULE
WHAT
Changes to the Loan and Settlement Disclosure forms
and processes are coming.
WHEN
The changes will be effective for transactions where
a loan application is taken by a lender on or after
August 1, 2015.
WHY
Because the Dodd-Frank Act of 2010 mandates the
combination of the Truth in Lending Act (TILA) loan
disclosures with the Real Estate Settlement Procedures
Act (RESPA) Good Faith Estimate and HUD-1 Settlement
Statement disclosures.
HOW
The Consumer Financial Protection Bureau (CFPB), an
entity created by the Dodd-Frank Act, issued a new
TILA final regulation that, among other things, created
two new forms (each with many variations) and new 3
business day delivery requirements.
• Loan Estimate – 3 business days after application
• Closing Disclosure – 3 business days before
consummation
WHO WILL ISSUE THE FORMS?
• Loan Estimate – Lender or Mortgage Broker
• Closing Disclosure – Lender or Settlement Agent
(Escrow). Lender may delegate responsibility to the
Settlement Agent (Escrow).
Title Talk | Spring 2015
AUGUST 1, 2015
ENFORCEMENT
The CFPB can levy substantial penalties so lenders will
be very cautious:
• Up to $5,000 per day for any violation of a law, rule,
or final order or condition imposed in writing by the
Bureau;
• Up to $25,000 per day for any person that recklessly
engages in a violation of a Federal consumer financial
law; and
• Up to $1,000,000 per day for any person who
knowingly violates a Federal consumer financial law.
IMPACT ON REAL ESTATE
PROFESSIONALS
• Closings may take longer because of 3 business day
review periods.
• You’ll be seeing different forms for most transactions.
• Your contact information and license number must
appear on the Closing Disclosure form. (see page 5
of the Closing Disclosure form)
• Your clients may receive multiple Loan Estimates due
to:
» “Changed circumstances” – certain defined
circumstances that cause the estimated charges
to increase by more than the variance allowed
under the Final Rule;
» Multiple applications with different lenders; or
» Multiple applications for different loan products
with the same lender.
• Your clients may receive multiple Closing Disclosures:
» Some with a 3 day business day waiting period
and some without; and
» Some before closing and some after.
Page 4
CFPB
TILA-RESPA Integrated Disclosure Rule
The Questions Attorneys and Agents Need Answers to,
Some Answers, and Why We Don’t Have All the Answers … YET
By: Ruth Dillingham, Special Counsel, First American Title – Boston, MA
Is this really going to happen? Isn’t a Republican Congress going to repeal Dodd-Frank?
It is going to happen; it begins on August 1, 2015, and no, Congress is not going to repeal the law.
1. WHAT IS THIS REALLY? JUST A NEW HUD-1?
No, it is not a new HUD-1. The CFPB has created two
forms that combine the current Truth-in-Lending
disclosures with the current RESPA disclosures
(the Good Faith Estimate and HUD-1 Settlement
Statement). The new forms are a Loan Estimate
(given by the Lender to the loan applicant 3 days
after application) and the Closing Disclosure
that must be received by the borrower 3 business
days before closing. The big issue is not the fact
that there is a new form or even the new timelines,
although those are important, but rather the liability
of the preparer of the form to the borrower for its
accuracy.
2. WHY ARE THE LENDERS SO CONCERNED
ABOUT THE NEW FORM BEING CORRECT?
Two reasons: First, due to the requirements of
the Ability-to-Repay and Qualified Mortgage
(QM) Rule that started in January 2014, lenders
have to know much more about the financial
terms of both the mortgage transaction and the
purchase transaction, and more information about
the property. For example, an adjustment made
between a buyer and a seller (such as a seller credit
for a betterment that changes the loan-to-value
ratio) can impact the ‘salability’ of the loan on the
secondary mortgage market. Lenders are already
Title Talk | Spring 2015
feeling the costs of non-Qualified Mortgage (QM)
loans and are looking to tighten controls around
changes to the settlement costs without their
consent.
With regard to the Integrated Disclosure Rule,
the lender, and only the lender, is responsible
for the accuracy of the entire Closing Disclosure,
which contains components of both the RESPA
and TILA Disclosures. This differs from the current
(2014) situation, where the closing/settlement
agent is responsible for the HUD-1 and the lender
is responsible for the TIL. This Rule was issued
pursuant to TILA, which changes the financial
liability dramatically.
3. WHAT DOES THAT FINANCIAL
LIABILITY MEAN?
Currently, if there is an error on the HUD-1 (an
incorrect tax adjustment, the wrong amount of
a payoff figure, etc.) it is a violation of Section
4 of RESPA – but there is no penalty for noncompliance. While the statute does allow for
administrative actions against a violator (such as
by HUD or the CFPB) there is no private right of
action (the borrower or seller can’t sue the closing/
settlement agent or attorney).
Page 5
CFPB
TILA-RESPA Integrated Disclosure Rule
Under TILA, if there is a violation, the borrower
can sue the lender for statutory damages (up to
$4,000) as well as bring a private lawsuit for actual
damages, and the penalties in an administrative
action under Dodd-Frank can go from $5,000 to
$1 million per day.
WHAT WE DON’T KNOW YET? The impact of this Rule
on potential CFPB actions against lenders and the
potential for private lawsuits. This is why lenders are
taking the issue of ‘who prepares the Closing Disclosure’
so seriously.
4. WHEN WILL IT IMPACT ME?
The specific impact will be felt by settlement and
closing agents in a few stages:
First: Some lenders have already begun telling
their closing/settlement agents that they plan to
exert much more control over the current closing
process once this Rule takes effect. The most
notable example is Wells Fargo which sent a
notice* to all its agents on September 24, 2014,
stating it plans to prepare the Closing Disclosure.
WHAT WE DON’T KNOW YET? What other lenders
will decide. We expect that most lenders will have
decided how they want to handle the issuance of the
Closing Disclosure and control over any changes in the
first few months of 2015. Every settlement/closing agent
and attorney should be reaching out to their lenders to
see what their thought process is at this point.
Second: As lenders decide what level of control
they will keep over the final Closing Disclosure and
what changes will be permitted, we expect that
they will be revising their Closing Instructions.
WHAT WE DON’T KNOW YET? What those changes
will look like. We do think some lenders will use this
change in the Rule about conducting a closing to revisit
who they use for closing services and their controls over
them, and that it may also cause some to incorporate
vendor management criteria (such as ALTA Best Practices)
into their decision making.
5. WHEN WILL I GET TRAINING FROM
FIRST AMERICAN TITLE, MY LENDER AND
SOFTWARE VENDOR?
Since most lenders are still making management
level decisions about implementation of the Rule,
First American Title training programs, and theirs,
will be coming as they reach those determinations;
many software vendors are awaiting specific
information from lenders as well.
First American Title training on the
complete new Rule is in production
at this time and will be ready for
presentations in April 2015.
We are also creating a tab in AgentNet ® for
updates on the Rule, as well as links to resources
that we create to assist agents.
We can assure our agents that we, as a company,
have reached out to all of our lender contacts and
have a presence at all of the industry discussions
taking place regionally and nationally through
ALTA, the Mortgage Bankers Association and other
trade groups. Further, we have reached out to
software vendors (such as SoftPro, RamQuest) and
have confirmed that they and the First American
products (TARA, TSS and StreamLine) are on line to
have all upgrades ready in time to do training for
agents using them in early 2015.
*To read the Wells Fargo Settlement Agent Communication, visit:
http://www.alta.org/advocacy/news.cfm?newsID=26035
Title Talk | Spring 2015
Page 6
C O R P O R AT I O N
of
By: Thomas W. Blair, VP, Regional Counsel, First American Title
Have you ever attended a wedding ceremony in
which the bride and groom take the flame from
separate candles to light one larger candle, thereby
symbolizing that the two have become one? Well, just
as that married couple is considered one in the eyes
of the church, if the married couple owns real estate,
they are deemed to be one in title. Such ownership is
called tenancy by the entirety.
Tenancy by the entirety (hereafter referred to as
t-by-e) is a type of concurrent estate in real property
held by a husband and wife whereby each owns the
undivided whole of the property, coupled with the
right of survivorship.1 So, what does that mean? To
put it simply: one spouse cannot do anything with the
real property without the consent and joinder of the
other spouse.
The concept of t-by-e ownership is grounded (no
pun intended) in common law with a married couple
holding title being analogous to the real estate being
owned by a separate entity. Based on that analogy,
I like to refer to t-by-e as a corporation of love.
Keeping in mind the corporation of love analogy, let’s
go through some of the aspects of t-by-e ownership.
Just as a corporation cannot hold title to property if
it has not yet been formed, two individuals cannot
hold title as t-by-e, with its accompanying benefits,
unless they are married to each other at the time of
acquisition. If property is acquired by two persons
prior to their marriage, the subsequent marriage
does not automatically convert title to t-by-e; it is still
owned by the individuals in their separate capacity.
The couple must transfer title to themselves as
husband and wife, or as t-by-e, after the marriage to
take advantage of the benefits of t-by-e ownership.
Title Talk | Spring 2015
Unlike a joint tenancy with the right of survivorship
in which the deed must contain certain language to
show the intent of the parties to hold title as joint
tenants and not as tenants in common, a t-by-e can
be created without special language in the deed. The
mere fact that the grantees are married to each other
when they acquire the property is sufficient to create a
t-by-e; the theory being the married couple intended
to hold title as t-by-e unless otherwise indicated in the
deed. From a practical standpoint, however, it is best
if the deed contains a reference to the couple being
married, such as “John Doe and Jane Doe, husband
and wife” or something similar.
Once the married couple acquires title to real
property, one spouse does not have the power to
sell, mortgage, lease or otherwise encumber the
property without the consent and joinder of the
other spouse. Therefore, to have a valid mortgage
on the real property, both spouses must be identified
as mortgagors/borrowers and sign the mortgage.
Notice the underlined portion of the prior sentence.
The import is that just having both spouses sign
the mortgage is not enough to create a valid lien
on the real estate; they must both be identified as
mortgagors/borrowers in the mortgage. Failure to do
this could result in a Bankruptcy Trustee successfully
avoiding the lien of the mortgage.
Just as one spouse cannot voluntarily encumber
t-by-e real property, the real property owned by a
married couple is protected against creditors of
one of the spouses, unless the creditor is the United
States of America through either a tax lien or criminal
judgment.2 Because it is protected against judgments
entered solely against one spouse, the married
couple can sell its real property without having to pay
judgments against one of them.
Page 7
Corporation of Love (cont.)
Be careful insuring refinance transactions when there
are judgments against one spouse, though. If the
non-debtor spouse dies, the t-by-e is terminated and
judgments against the surviving spouse will attach
to the real property retroactively to the date the
judgment was filed, thereby having lien priority over
our insured mortgage. With that in mind, make sure
all judgments are paid off in refinance transactions.
The same situation could occur if the couple gets
divorced; title converts to a tenancy in common and
any judgments against one spouse retroactively
attach to that spouse’s interest in the property.
Upon the death of one of the spouses, title to the real
property automatically vests in the surviving spouse. If
the surviving spouse sells or mortgages the property, the
document should contain a recital with the deceased
spouse’s date of death; but please refrain from listing
the deceased spouse as a grantor/mortgagor.
For those of you who are not familiar with t-by-e, I
hope this gives you some valuable insight into this
type of tenancy. For those of you already familiar with
t-by-e, I hope this serves as a valuable reminder of
some of the issues surrounding this type of tenancy.
http://legal-dictionary.thefreedictionary.com/Tenancy+by+the+Entirety
1
In 2002, the U.S. Supreme Court held that a federal tax lien pierced t-by-e
ownership and attached to the taxpayer spouse’s interest in the property. U.S.
v. Craft, 535 U.S. 274, 122 S.Ct. 1414 (2002). In addition, courts have held that
certain criminal judgments in favor of the United States are treated like tax liens
and, therefore, pierce t-by-e ownership. See, for example, U.S. v. Goddard, 735
F.Supp.2d 820 (E.D.Tenn. 2010) pertaining to judgments under The Mandatory
Victims Restitution Act. Judgments entered pursuant to the Antiterrorism
and Effective Death Penalty Act of 1996 are treated in the same fashion.
LENDERS EMBRACE
ALTA BEST PRACTICES
By: Josie Lubiejewski, VP, Division Area Manager and
Mike Weber, Executive Assistant
More and more lenders are joining the ranks in
support of Best Practices. Formal letters have been
issued by national lenders Wells Fargo, Bank of
America and FirstMerit to settlement agents and
attorneys concerning requirements of compliance and
the submission of documentation to be used in the
vetting of settlement service providers.
While many Approved Attorneys work directly with
local lenders, paying attention to the expectations of
these national lenders is critical if you plan on doing
business as a service provider in the future. Maybe
you have already been notified by one of the lenders
you do business with concerning compliance with
ALTA’s Best Practices or their expectations of you, the
settlement service provider. If this has not yet occurred,
you may need to jumpstart the communication
process. It’s extremely important that you communicate
and work with your lenders now to make sure you
are aware of and ready to meet their standards for
settlement. You won’t want to be surprised by lender
requirements on or after August 1st!
2
Holiday and Office Closures
Our offices will be closed for business in observance
of the holidays listed below.
Monday, May 25, 2015 | Memorial Day
Friday, July 3, 2015 | Independence Day
Title Talk | Spring 2015
ANNOUNCEMENT
In case you missed it, the Pennsylvania Disciplinary
Board released an extensive proposal concerning
changes to the Rules of Professional Conduct and
Rules of Disciplinary Enforcement intended to reduce
the risk of large-scale misappropriation of funds. Here
is the link to the PA Disciplinary Board’s website for
all the details: http://www.padisciplinaryboard.org/
attorneys/newsletter/2014/september.php#story1
Page 8